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Yields jump to one-month high before record 10-year sale

By Karen Brettell NEW YORK, Aug 12 – U.S. Treasury yields jumped to one-month highs on Tuesday before the Treasury will sell a record amount of 10-year notes, and after data showed a larger-than-expected increase in consumer prices in July. The Treasury last week increased auction sizes across the curve and said that it plans to continue to shift more of its funding to longer-dated debt in coming quarters as it finances measures to offset the impact of the epidemic. “This whole week we’re dealing with supply coming into the market,” said Tom Simons, a money market economist at Jefferies in New York. The Treasury will sell a record $38 billion in 10-year notes on Wednesday and an additional $26 billion in 30-year bonds on Thursday. A record $48 billion sale of three-year notes on Tuesday drew solid demand after yields rose heading into the auction, making the notes more attractive. Yields also rose on Wednesday after the Labor Department said its consumer price index rose 0.6% last month after rebounding 0.6% in June. In the 12 months through July, the CPI accelerated 1.0% after climbing 0.6% in June. Economists polled by Reuters had forecast the CPI rising 0.3% in July and gaining 0.8% year-on-year. “This is a pretty surprising report,” Simons said. However, “year-over-year, you still see pretty weak readings. You have to look at the overall economy and how much slack there is,” Simons added. Benchmark 10-year note yields jumped seven basis points to 0.662% after earlier reaching 0.691%, the highest since July 7. They are up from a low of 0.504% on Thursday. The yield curve between two-year and 10-year notes steepened two basis points to 51 basis points. Treasuries have also weakened this week as risk appetite improved. Stocks rose on Wednesday with the S&P 500 crawling toward a record high. August 12 Wednesday 9:33AM New York / 1333 GMT Price US T BONDS SEP0 178-29/32 -0-7/32 10YR TNotes SEP0 139-60/256 -0-4/256 Price Current Net Yield % Change (bps) Three-month bills 0.105 0.1065 -0.006 Six-month bills 0.12 0.1217 -0.002 Two-year note 99-242/256 0.1529 -0.008 Three-year note 99-212/256 0.1826 -0.006 Five-year note 99-208/256 0.2881 -0.002 Seven-year note 99-56/256 0.4892 0.002 10-year note 99-164/256 0.6631 0.005 20-year bond 99-236/256 1.1294 0.010 30-year bond 97-104/256 1.3562 0.009 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.00 0.25 spread U.S. 3-year dollar swap 6.50 0.00 spread U.S. 5-year dollar swap 5.00 -0.50 spread U.S. 10-year dollar swap -0.50 -0.50 spread U.S. 30-year dollar swap -40.00 -0.25 spread (Reporting by Karen Brettell; Editing by Will Dunham)

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